Netflix, Intuitive Surgical lead afterhours rally



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  • The Standard & Poor’s 500 edged up 0.29% on Tuesday after last Friday’s first all-time high in two years.
  • Alongside US GDP figures on Thursday comes Durable Goods Orders.
  • US PCE inflation data will be released on Friday and is expected to fall on an annual basis.
  • Netflix, Tesla, Intel, Visa all report earnings this week.

 

S&P 500 futures rose nearly half a percentage point in Tuesday's postmarket after Netflix (NFLX) posted successful guidance for the current quarter. The streaming platform missed earnings consensus for the fourth quarter but raised its Q1 guidance to $4.49 compared with prior consensus of $4.14. That was enough to push NFLX stock 8% higher afterhours. The S&P 500 has advanced for four straight sessions and looks poised to notch a fifth on Wednesday.

Intuitive Surgical (ISRG) posted an earnings beat for the fourth quarter. Adjusted earnings per share (EPS) arrived at $1.60, 11 cents above consensus, and revenue of $1.93 billion rose 16% YoY, beating the forecast by $30 million.

The S&P 500 index has registered two all-time highs in quick succession. The first came last Friday, when the index overcame the 4,818 level for the first time in more than two years. Monday saw a new record high, but the index sold off late in the session. The new records are good news for the stock market, which has suffered in January due to reduced expectations for rate cuts in the new year. Bets on a rate cut at the Federal Reserve’s (Fed) March meeting have dwindled from 76% to 41% over the past month.

This week’s forecast should hinge on the onslaught of companies releasing fourth-quarter earnings results and several economic indicators released on late in the week. The major release of the week, US Personal Consumption Expenditures (PCE), will detail the US economy’s fight with inflation. That report will be preceded by GDP, Durable Goods Orders and Manufacturing and Services PMIs.

Contents

S&P 500 News: Tesla, Netflix lead cramped week of earnings

Johnson & Johnson (JNJ) beat earnings consensus for Q4 early Tuesday, but shares of the pharmaceutical giant still trended lower. The company reiterated 2024 guidance, and Q4 revenue rose 7% from a year ago.

Tesla (TSLA) follows on Wednesday. The electric vehicle leader faces consensus of $0.74 in adjusted EPS on revenue of $25.76 billion. Shareholders will brace for statements regarding the 2024 guidance, and shares will likely move based on that news. Additionally, the market is eager to learn how a new contract with CEO Elon Musk is coming along. Musk has said publicly he requires at least 25% ownership in the company to continue leading the Tesla's artificial intelligence (AI) efforts, adding that he may build those businesses outside Tesla.

Visa (V) and Intel (INTC) follow on Thursday. Visa is expected to earn $2.34 in adjusted EPS on $8.55 billion in revenue. Wall Street’s consensus for Intel is $0.45 in adjusted EPS on $15.18 billion in sales. INTC stock should move swiftly on the announcement since analysts are particularly optimistic in regard to the semiconductor of late.

December PCE will determine short-term equity direction

On Friday morning before the market opens, the US Bureau of Economic Analysis will release the Core PCE data for December. Similar to the Consumer Price Index (CPI), the PCE conveys a snapshot of the state of inflation in the US economy.

The biggest difference between the CPI and the PCE is that the Fed relies on it, rather prefers it, to the CPI when making decisions regarding interest rates. As it stands on Tuesday, consensus calls for annual Core PCE to drop to 3% from 3.2%. This would amount to further evidence that the Fed’s high rate environment continues to work toward reducing inflation.

The CPI earlier this month came in hot, and a hotter and higher than expected reading for the PCE will assuredly lead to an S&P 500 sell-off. November’s 0.1% monthly inflation reading is supposed to rise to 0.2% in December, but if it arrives flat with November, then the index will soar.

Before Friday’s PCE data, Wednesday supplies traders with the S&P Global Purchasing Managers Indices (PMIs). The Manufacturing PMI is supposed to print flat at 47.9 in contractionary territory, while the Services PMI is expected to drop from 51.4 to 51 but remain in expansionary territory.

The Preliminary GDP reading for Q4 arrives on Thursday and is supposed to reach 2% on an annual basis compared with 4.9% in Q3. December Durable Goods Orders the same day are forecast to grow 1.1% rather than 5.4% in the previous reading.

Nasdaq FAQs

The Nasdaq is a stock exchange based in the US that started out life as an electronic stock quotation machine. At first, the Nasdaq only provided quotations for over-the-counter (OTC) stocks but later it became an exchange too. By 1991, the Nasdaq had grown to account for 46% of the entire US securities’ market. In 1998, it became the first stock exchange in the US to provide online trading. The Nasdaq also produces several indices, the most comprehensive of which is the Nasdaq Composite representing all 2,500-plus stocks on the Nasdaq, and the Nasdaq 100.

The Nasdaq 100 is a large-cap index made up of 100 non-financial companies from the Nasdaq stock exchange. Although it only includes a fraction of the thousands of stocks in the Nasdaq, it accounts for over 90% of the movement. The influence of each company on the index is market-cap weighted. The Nasdaq 100 includes companies with a significant focus on technology although it also encompasses companies from other industries and from outside the US. The average annual return of the Nasdaq 100 has been 17.23% since 1986.

There are a number of ways to trade the Nasdaq 100. Most retail brokers and spread betting platforms offer bets using Contracts for Difference (CFD). For longer-term investors, Exchange-Traded Funds (ETFs) trade like shares that mimic the movement of the index without the investor needing to buy all 100 constituent companies. An example ETF is the Invesco QQQ Trust (QQQ). Nasdaq 100 futures contracts allow traders to speculate on the future direction of the index. Options provide the right, but not the obligation, to buy or sell the Nasdaq 100 at a specific price (strike price) in the future.

Many different factors drive the Nasdaq 100 but mainly it is the aggregate performance of the component companies revealed in their quarterly and annual company earnings reports. US and global macroeconomic data also contributes as it impacts on investor sentiment, which if positive drives gains. The level of interest rates, set by the Federal Reserve (Fed), also influences the Nasdaq 100 as it affects the cost of credit, on which many corporations are heavily reliant. As such the level of inflation can be a major driver too as well as other metrics which impact on the decisions of the Fed.

Earnings of the week

Monday, January 22 – Brown & Brown (BRO), United Airlines (UAL), Zions Bancorporation (ZION)

Tuesday, January 23 – Johnson & Johnson (JNJ), Procter & Gamble (PG), Netflix (NFLX), Verizon Communications (VZ), Texas Instruments (TXN), General Electric (GE), and Lockheed Martin (LMT).

Wednesday, January 24 – Tesla (TSLA), Abbott Laboratories (ABT), IBM (IBM), AT&T (T), General Dynamics (GD), Las Vegas Sands (LVS), CSX (CSX)

Thursday, January 25 – Visa (V), Intel (INTC), Comcast (CMCSA), Union Pacific (UNP), American Airlines Group (AAL), Southwest Airlines (LUV), Levi Strauss (LEVI) and Alaska Air Group (ALK).

Friday, January 26 – American Express (AXP), Colgate-Palmolive (CL), Norfolk Southern (NSC)

 

S&P 500 forecast

The S&P 500 index produced a new all-time high on Monday at 4,868, but the index plunged enough to produce a shooting star candlestick by the close of the session. That was bad since that formation typically portends the start of a bearish reversal. However, the index gained 0.29% on Tuesday, so it appears that the rally is still in place. 

The S&P 500 is trading well above its 20-day Simple Moving Average (SMA). The only cause for worry is that once again the Relative Strength Index (RSI) is back in overbought territory. It seems that a worse outlook for Fed rate cuts hasn't dimished traders' January bullishness.

By the looks of it, the index may have a few more weeks of gains before consolidation sets in. Either way, Friday's Core PCE data will determine market movements for the end of the month.

S&P 500 daily chart

 



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